A September Fed taper won't last: ‘Currency Wars’ author

If the Federal Reserve begins pulling its irons out of the stimulus fire in September, the resulting rocketing of the dollar and accompanying deflation will lead the Fed to reverse course by early 2014.

Rickards, who said September tapering could spur the dollar to jump 20 percent versus the yen, added, "The bigger picture is the Fed has no good alternative."

The central dilemma: The Fed is feeling heat to ratchet down its $85 billion-a-month bond-buying program, which pressures the dollar because it is tantamount to printing money. Hawks are worried about asset bubbles and systemic risks. Growing speculation that the Fed would taper in September sent the dollar index to three-year highs early this week.

Rickards didn't buy tapering in September even before Bernanke's remarks, because he believes coming economic data will be worse than expected.

"However, if the Fed does taper in September, they will find the economy sinks much faster than expected and ... they will have to increase asset purchases by early 2014," he said. But "it's September or nothing" for tapering, he added.

"If they taper, it will be at an FOMC meeting with a press conference because the move is so significant the Fed will want the press conference to explain very carefully what they have done," Rickards said. The September meeting is the only one with scheduled remarks from the Fed chairman until December, which will be too close to Bernanke's expected exit in January to announce a major policy shift.

Opportunity to Buy Dollars?

In fact, despite the Fed minutes' call for "additional clarity" about its asset-purchase program, the main point of agreement among traders seems to be that the central bank's communications last week lacked directness and cohesion.

"They're trying to fine-tune everything in a complex system, and that's impossible," Rickards said of the Fed's manipulations and contortions. "There are inherent contradictions."

Kathy Lien of BK Asset Management said the moment nevertheless presents an opportunity. She told "Street Signs" that the greenback's slide after Bernanke's remarks made for "a great day to go long on the dollar."

"We had a nice little pullback," she said, adding that in "the most liquid currency pair" she sees little blocking the euro's way to $1.20. By Friday afternoon it had climbed back 2.4 percent, to $1.306.

"This is an opportunity to come back into the dollar at lower levels," Lien said.